BALTIMORE ( Stockpickr) -- Investors got a chance to see a large-scale short squeeze in play on Monday as traders who were short the Euro were forced to cover their positions. The currency climbed earlier this week thanks to eased concerns about Greece's debt outlook, a situation that threatened to tarnish the EU's formerly spotless economic track record. But short squeezes aren't relegated to FX traders. This week, we'll take a look at highly shorted companies that generate significant free cash flow.
But first, more on short squeezes: A short squeeze is the buying frenzy that ensues when a heavily shorted stock starts to look attractive again to investors, causing share price to skyrocket. One of the best indicators of just how high a short-squeezed stock could go is the short interest ratio, which estimates the number of days it would take for short-sellers to cover their positions. The higher the short ratio, the higher the potential profits when the shorts get squeezed.
Each week, I create a portfolio of stocks with high short interest ratios and the catalysts to trigger a squeeze. Here's a look at this week's potential plays.